Government announces new 184 billion euro stimulus plan

Deflation-hit Japan has announced a new stimulus plan worth an estimated 184 billion euros in an effort to support the economy, which risks hitting recession again.

AFP - Japan announced a huge 274 billion dollar stimulus Tuesday to jump-start a fragile recovery in the world's second largest economy, including more than 80 billion dollars in direct spending.

The pump-priming is meant to boost a gradual return to health from Japan's worst post-war recession, a rebound that started early this year but is now threatened by deflation and the strong yen's impact on exports.

"We must present an economic package promptly in order to make the economic recovery solid in the face of the current severe economic and employment situation, the yen's rise and deflation," the government said in a statement.

"We will do our utmost to regain (Japan's) vigour."

The cabinet of centre-left Prime Minister Yukio Hatoyama decided the size of the package, to be financed by an extra budget for the fiscal year to March 2010, after disagreements in the ruling coalition delayed it Friday.

The extra budget, this fiscal year's second, will require approval by the Diet legislature which is next scheduled to convene in January.

"We made a cabinet decision on the emergency economic measures," chief government spokesman Hirofumi Hirano told reporters Tuesday. "The scale exceeds 24 trillion yen in terms of the value of projects."

The new package includes direct spending as well as loan guarantees and other measures that do not necessarily require government outlays, totalling 24.4 trillion yen (274 billion dollars), the government said.

It would extend a reward programme for consumers who buy energy-efficient appliances, give loan guarantees for small and mid-size businesses, and include spending to help struggling companies retain workers.

Deputy Prime Minister Naoto Kan said: "I believe we have made an economic package focussed on employment, the environment and economic measures."

Japan's economy, after plunging into deep recession last year amid the global downturn, grew 4.8 percent on an annualised basis in the July-September quarter, the fastest rate in two and a half years, preliminary data showed.

Unemployment fell to 5.1 percent in October from 5.3 percent in September.

However, falling consumer prices and a surging yen, which hit a 14-year-high of about 84 to the dollar last month, have raised fears the recovery could stall. The dollar traded at around 89 yen in Tokyo Tuesday.

Hatoyama has warned of the threat of a double-dip recession in Japan.

His government, which ousted the long-ruling conservative party in a landslide election in August, earlier froze part of its predecessor's first supplementary budget, which was worth 13.9 trillion yen.

It cited the need to slash government waste in Japan, where public debt is around 180 percent of gross domestic product, largely due to massive stimulus spending during the economic "lost decade" of the 1990s.

The new stimulus package was held up Friday when the financial services minister, Shizuka Kamei, boycotted a ministerial meeting while demanding additional spending. The package was later boosted by 100 billion yen.

Hatoyama's Democratic Party of Japan needs the support of Kamei's smaller People's New Party to ensure passage of laws in the upper house.

The package includes 4.1 trillion yen for environmental measures, such as incentives to buy energy-saving appliances, cars and houses.

Economic and financial measures, such as helping smaller companies borrow money, total 18.6 trillion yen. Another 600 billion yen will be spent on measures including paying struggling companies to keep staff on their payrolls.